Price rise vs economic growth: Will tax cuts help Modi government fight inflation?
India Today
The government is facing a tough challenge of price rises and has taken a slew of measures to bring down the stubbornly high inflation rate which has remained above the tolerance level for the past four months.
The central government's move to hike export duties and cut taxes will likely to hurt economic growth and raise the chances of the fiscal deficit widening, but do little to bring down retail prices within the central bank's tolerance level, economists and industry officials were quoted as saying by Reuters.
The government on Saturday cut excise duty on petrol by a record Rs 8 per litre and that on diesel by Rs 6 per litre to give relief to consumers from high fuel prices.
The government imposed an export tax of 15 per cent on eight steel products on Saturday.
The government also boosted export taxes on iron ore and concentrates to 50 per cent from 30 per cent currently, and imposed a hefty 45 per cent tax on iron ore pellets.
On the other hand, import duty on raw materials of plastic products and steel has been reduced.
Meanwhile, Reserve Bank of India (RBI) Governor Shaktikanta Das has hinted at another interest rate hike in June to bring down the high inflation rate which has remained above the tolerance level for the past four months. The next meeting of the Monetary Policy Committee (MPC) is scheduled for June 6-8.
"Expectation of rate hike, it's a no-brainer. There will be some hike but how much I will not be able to tell now... to say that 5.15 (per cent) may not be very accurate," Das said in an interview with CNBC-TV18.
